Five numbers to determine William Hill's future

During last week’s full-year results presentation, William Hill CEO James Henderson outlined the operator’s three strategic priorities for 2015 – omni-channel, international and technology.

But what can we learn from the key numbers and what do they tell us about William Hill’s future?

15: A move towards technological independence

There are currently 22 components to William Hill’s core technology stack of which the firm has complete control over 15, including the vast majority of its front-end. The latter figure is likely to increase in the coming years as part of a broader strategy to reduce its reliance on third-party suppliers.

Boosted by a dedicated tech-focused teams in Leeds and Shoreditch, William Hill has made significant strides in technology over the past couple of years and is preparing to roll-out a raft of what it claims are innovative and differentiating products in 2015.

At the heart of its strategy is the completion of Project Trafalgar, which will see an overhaul of its front-end framework to provide a faster and more responsive website, in addition to new analytics tools and greater A/B testing.

However, although proprietary ownership of its core systems clearly has its advantages, William Hill remains reliant on certain suppliers such as Playtech and OpenBet. “Our approach is to mix the best-of-breed third party systems with our own proprietary systems, thereby allowing us to differentiate and provide a unique customer experience,” Henderson explains.

And as other operators including Paddy Power – in contrast to Ladbrokes and its increased dependence on Playtech – take a similar approach, a new battleground is being created where in-house developed platforms, trading and content will be put to the test.

34%: Finding growth from the retail cross-sell

Just over one-third (34%) of William Hill’s retail customers regularly bet online, a figure which demonstrates the importance of what is now a staple industry buzzword: ‘omni-channel’.

William Hill is still the market-leader in the UK retail space, owning an estimated 2,362 betting shops, with full-year revenues of £911.4m putting it ahead of nearest rival Ladbrokes with £811.5m from 2,209 UK shops.

But it is the fact that two-thirds of its vast retail customer-base have yet to make the transition online which is surely driving this strategy. “Our primary focus is on maximising our share of wallet of those customers,” Henderson said.

And the operator is aiming to make the migration between retail and online as easy as possible. To achieve this William Hill is focused on developing its product range, customer data and technology to offer customers consistent content and a seamless experience across all channels.

A number of retail technology changes are now on the way including content from its shops, such as live streams and ‘Yes/No’ betting coupons, being adapted for online and app usage for the first time. Meanwhile the operator has reprioritised its 2015 retail capital investment and customers can expect to see vast changes to William Hill estates this year such as HTML functionality on video walls, the launch of Tip Advisor and more online football content on SSBTs.

Getting ahead of its rivals in this area is vital and if does, given its advantage in retail scale, William Hill could be the first operator to really make omni-channel pay.

18%: Plenty of UK growth potential remains

Last week’s results revealed the company achieved strong double-digit revenue growth from the UK, up 18% year-on-year and significantly above market size growth estimates of between 8% and 10%.

The UK market is William Hill’s bread and butter – it is 74% of online revenues – which shows little sign of changing anytime soon despite its recent expansion into potentially lucrative markets such as Italy, Spain, Australia and the US.

The growth came despite “unfavourable” sports results during 2014 and was particularly strong in H2 with net revenues up 29%, new accounts and actives increasing 7% and 17% respectively, and revenue per unique active up 10%.

Henderson is confident the firm can carry this momentum into 2015 and beyond as it prepares to ramp-up its product development in response to the introduction of the Point of Consumption regime in December 2014.

“I think our numbers are good and we have an opportunity in a Point of Consumption environment to make sure we continue to invest in product and content, so that we can maintain our UK number one position, so we will continue to do that,” he said.

52%: Cashing in on gaming

William Hill is so synonymous with sports betting that it’s easy to forget the company derives more of its online revenues – 52% – from gaming, providing some protection against unfavourable sporting results which can often be exacerbated by the increase in popularity of accumulator bets.

Last year online gaming revenues increased 17% year-on-year to £274.1m, compared to sportsbook revenue which, although growing at a faster rate at 19% year-on-year, came in lower at £253.3m.

Much of the growth is down to mobile and the operator has been committed to launching a raft of new mobile gaming products, including its flagship proprietary William Hill Vegas app. “Online returned to double-digit growth in gaming revenues during 2014 as a result of the technology and product developments made to enhance the mobile gaming product range and user experience,” the operator said.

William Hill’s mobile gaming arm recorded exponential growth in 2014 with revenues increasing 117% – accounting for 32% of total gaming revenues – while during the same period desktop gaming revenues decreased by 3%.

Rival operator Paddy Power is widely recognised as the leader in mobile gaming and in 2014 incorporated new tracking, push notification and single-sign-on functionality, as mobile gaming revenues increased 58% year-on-year.

Mobile accounts for 40% of total gaming revenues at the Irish operator, an industry leading position, however William Hill has arguably closed the gap after hitting the same mark in December, albeit its full-year total was 32%.

40%: Big push Down Under

As it incorporates its Sportingbet, Centrebet and Tom Waterhouse brands under the William Hill moniker and migrates all customers onto a single platform, the operator has pledged to invest an additional 40% in marketing funds this year in order to raise the profile of the global brand.

There will be a healthy £5m ploughed into brand awareness over the next few months and Australian punters can expect plenty of enticing offers as the firm looks to compete with the likes of Tabcorp and Paddy Power’s Sportsbet.

That pair are the clear market leaders, however William Hill isn’t far behind and if it spends its marketing cash wisely and avoids a customer exodus post-brand migration, it should have the product and expertise to eat away at its rivals’ lead.

William Hill’s Australian arm recorded strong 41% year-on-year revenue growth and a 106% increase in operating profit but aside from tough competition there is increased race field fees and rocketing marketing costs to content with.

“The combination of race field fees and currency means that we are unlikely to achieve our previous goal of delivering a return in excess of WACC [weighted average cost of capital] by 2016,” Neil Cooper, CFO, said, adding that he expected to “deliver on that and return to target by 2018”.

Australia will be a key long-term market for William Hill and investment at this early stage in proceedings is key. Patience will be vital.